Mind the Gap: Spend Better for Health

Contributors: Clinton Moloney and Natalie Teear
To learn more about Clinton and Natalie, click here.

 

Intimidated by the investment costs associated with achieving better health upstream? Don’t know where to start? Here is how to address social determinants of health without adding a dime to your operating budget. 

Spend smarter
image001.pngDespite the shift toward value-based payment models, most health organizations are struggling to meaningfully improve patient health outcomes.

That’s largely because the bulk of what determines a person’s health is not what happens in the doctor’s office, but rather the social and environmental conditions in the places where people live, work, and play. Solving problems like poverty, education, or air quality is a monumental and resource-intensive undertaking that can be hard to justify in today’s cost-focused market environment. 

But what if we said there's a way to tackle these issues that doesn't require spending any more money, just spending it better? Every dollar that a health organization spends has an impact on health. The trick is to redirect those dollars in a way that boosts the positive social impacts and diminishes any harmful effects.

Consider how your operating spend impacts patients and communities
image003.pngMission-driven investors have a long history of putting their money to work for their values, whether that’s by divesting from tobacco and firearms or by proactively funding renewable energy and social entrepreneurship. Imagine the societal transformation we’d see if our health system — which makes up 17.9 percent of the country’s GDP — did the same.1   

Let’s take hospitals as an example. A typical hospital operating budget averages 50 percent or more on labor expense, 15 percent on supplies and nearly 3 percent on IT.2  In an ideal world, every dollar spent would be directed toward win-wins that fulfill the original operational purpose and also help address social determinants of health in the communities they serve.

Make your money work harder
image005.pngThere are all sorts of ways to redirect operating spend toward initiatives that have a positive health impact, for example:

Do you buy locally? Local procurement is an easy way to make communities healthier. It creates jobs, which helps people afford healthier behaviors and living conditions, and spurs economic development, which can generate additional tax revenue for local governments to spend on health resources. University of Vermont Medical Center’s economic impact analysis shows the hospital’s local food service procurement efforts contributed about $2.7 million to the Vermont economy, with $1.6 million in direct food purchases and another $1.1 million in induced and indirect impacts (e.g., suppliers procuring goods/services locally). 3

Are you hiring people from disadvantaged backgrounds? Fair and stable employment is key to helping vulnerable populations get healthy and stay that way. Ex-offenders, for example, are more likely to have chronic medical conditions and less likely to have the resources needed to manage them.4  A Johns Hopkins study showed that hiring people with criminal backgrounds can have a transformative impact on their health — by lifting income levels, providing access to quality healthcare, and reducing the likelihood of reoffending. It also can be good for business: Johns Hopkins Hospital also found that hiring ex-offenders resulted in lower turnover rates. 5 

Do you use clean energy?
image005.pngAdopting pollution-free energy sources like wind and solar can help improve health conditions related to air quality such as asthma or chronic bronchitis. Practice Greenhealth completed a study for a Midwestern health system that found shifting just 5 percent of purchasing to clean energy over three years not only was cost neutral, but also yielded significant health improvements for the community. The reduced health burden is estimated to result in more than $46,000 in medical cost savings for the health system and almost $400,000 in societal value for the region.6

Do you give preferential treatment to environmentally sustainable products? Many traditional building and cleaning products now have green alternatives that offer the same performance, but with less exposure to toxic chemicals. As part of its effort to transition 50 percent of its supply chain spend to products and materials that meet environmental standards, Kaiser Permanente banned paint and other interior building products treated with antimicrobial agents, which can be harmful to both people and the environment and do not offer any enhanced protection from the spread of bacteria and germs.7 

Discover the magic of win-wins
image007.pngFiguring out when and how to invest in these types of win-wins can be tricky. Commitment from the top is key — employees need a clear mandate from leadership to start factoring health impacts into core operating decisions that traditionally focus on just cost and quality. This directive should start with the C-suite and extend to all support functions, including procurement, human capital, IT and facilities management. 

Equally important are the data, technology, and governance resources that can enable this new kind of decision-making. For example, consider the Healthcare Sustainable Purchasing Index, a cloud-based analytics solution providing healthcare systems with the insight they need to redirect procurement spend toward more sustainable choices. 

With this approach, your organization can train the full strength of its operating budget toward solving social determinants of health, without spending a dime.

Questions?
PwC is committed to helping our clients address social determinants of health in the communities they serve. For more information and to learn more about how you can build a profitable approach to caring for vulnerable populations, go online or contact one of our leaders.

 

Clinton_Moloney.jpg

Clinton Moloney
Managing Director
Sustainability
650.714.7808
clinton.a.moloney@pwc.com

Natalie_Teear_2.jpg

Natalie Teear
Director
Sustainability
310.463.4985
natalie.a.teear@pwc.com


 

References

  1. Centers for Medicare & Medicaid Services. 2018. “NHE Fact Sheet.” Accessed Feb. 14, 2018. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.
  2. Abdulsalam Y and Scgneller E. 2017. “Hospital supply expenses: An important ingredient in health services research.” Medical Care Research and Review. doi:10.1177/1077558717719928; HIMSS Analytics & HIMSS. 2012. “2012 Annual Report of the U.S. Hospital IT Market.” 
  3. Bescot F, Conner D, Imrie D, and Ettman K. 2016. “Assessing the impacts of local hospital food procurement: Results from Vermont.” Journal of Foodservice Management & Education, 10(1), 1-7. http://fsmec.org/wp-content/uploads/2016/08/10-1.pdf.
  4. Binswanger IA, Krueger PM and Steiner JF. 2009. “Prevalence of chronic medical conditions among jail and prison inmates in the USA compared with the general population.” Journal of Epidemiology & Community Health, 63(11), 912-919. doi:10.1136/jech.2009.090662.
  5. Paulk PD. 2016. “The Johns Hopkins Hospital success in hiring ex-offenders.” http://bestpractices.diversityinc.com/medialib/uploads/2016/09/Paulk-Presentation-Hiring-Ex-Offenders-09142016.pdf.
  6. Healthcare Clean Energy Exchange & Practice Greenhealth. “Energy impact calculator W1.0 Mid-Western health system case study executive summary.” Accessed March 23, 2018. http://www.eichealth.org/docs/eic%20midwestern%20case%20study1.pdf.
  7. Kaiser Permanente. 2015. “Kaiser Permanente rejects antimicrobials for infection control [Press release].” Dec. 11, 2015. https://share.kaiserpermanente.org/article/kaiser-permanente-rejects-antimicrobials-for-infection-control/.